Global perspective yields healthy returns

By Alli-Michelle Conti
Contributing Writer

The last few years have not been kind to the insurance industry. The turmoil in the financial markets of the Great Recession challenged all investors, both individual and institutional, especially those that rely on yearly returns to help fund operations, such as property and casualty insurer FM Global. More

The last few years have not been kind to the insurance industry. The turmoil in the financial markets of the Great Recession challenged all investors, both individual and institutional, especially those that rely on yearly returns to help fund operations, such as property and casualty insurer FM Global.

But there were more challenges to overcome. In 2011, six natural disasters generated losses of more than $100 million, with another five across the globe costing more than $20 million. As an insurer with clients in 130 countries, Johnston-based FM Global had to pay out on hundreds of millions of dollars in claims.

But thanks in large measure to the cash-management strategies of Senior Vice President and Chief Financial Officer Jeffrey A. Burchill, FM Global did so without having to sell off any assets. In fact, since 2008, the mutual insurer has seen its policyholder surplus go from $4.6 billion to $7.9 billion at the end of 2012. That surplus is one of the many reasons that Burchill has been chosen to receive the Providence Business News Chief Financial Officer Awards program’s recognition for career achievement.

Burchill has been the CFO for FM Global since it was formed in 1999 from the merger of five different insurance companies, by which time he already had put in 25 years with one of the merging entities. He started as an accounting manager, and over the years rose through the ranks as vice president, treasurer and corporate vice president, as well as a controller.

But his path to being recognized for career achievement really started with the 1999 merger. As the corporate CFO, Burchill had to meld five different companies into one. “There was no business-school matrix to follow for how to seamlessly integrate five companies each with their own separate and unique culture, management philosophies and business systems,” wrote FM Global Chairman and CEO Shivan S. Subramaniam in his nominating form for Burchill.

But the undergraduate accounting and economics major from Aurora College, who went on to earn an MBA from Northwestern University, did just that. In fact, Burchill was so successful at helping make the merger work that FM Global has grown fivefold in the last decade to more than $5 billion in annual revenue. But it hasn’t been a simple task.

“During the past several years, there has been a lot of turmoil in the financial markets,” said Burchill, “which has caused much volatility to our capital. There’s also been much fluctuation in the strength of the dollar and the challenge has been to come up with a strategy that creates stability so we don’t have to react to such fluctuations.”

Given that Burchill has global responsibility for all financial aspects of the company, according to his nomination form, and has a team that stretches from Australia to Canada, Mexico, Singapore and the United Kingdom (not to mention Johnston), he has to work through all the potential implications before charging ahead.

For example, he said, “when the Thailand flooding of 2011 occurred, we could have rushed to buy Thailand currency. But, we advocated a let’s-wait-and-see approach … to see what types and sizes of claims materialized.”

As it turns out, taking a step back to observe the situation was the correct tactic. A lot of currencies came into play from other countries due to supply-chain dependencies worldwide.

“It’s a good thing we advocated for patience and let the losses develop before we made financial decisions,” said Burchill.

As a mutual insurer, owned by their policyholders, the company can take a long-term view and choose not to react to financial market cycles or specific underwriting losses. It’s a strategy Burchill follows to make decisions in the company’s broader interest rather than making short-term choices simply designed to satisfy Wall Street.

In addition, his “cash is king” investment philosophy has given the company greater flexibility over the years, allowing it to “invest heavily in equities and make prudent decisions with our capital,” he said. Combined with the company’s well-known loss-prevention expertise, FM Global is able to “take smart underwriting risks,” according to Subramaniam’s nomination.

But Burchill’s approach is not just about the numbers. Going forward, he said goals include streamlining to maximize services to customers and lower costs. “We are looking organizationwide at our cost structure and new ways to drive efficiency to increase the margin to pay losses for our clients and provide them with more capacity,” he said.

Burchill’s success in helping guide the company has not gone unnoticed. In 2009, he was named one of three “CFOs to Watch” by Treasury and Risk magazine and one of the “100 Most Influential People in Finance,” alongside luminaries such as President Barack Obama, Treasury Secretary Timothy Geithner and JP Morgan Chase CEO Jamie Dimon.

Just as important, FM Global’s performance and approach to business is noticed in the world of finance. “Our high liquidity is looked upon positively with the insurance ratings agencies, because it speaks to our claims-paying ability and that has been an important contributor to the company maintaining very strong financial strength ratings, year after year,” said Burchill.

But perhaps his colleagues sum up Burchill’s success best. “[He] foresees obstacles and opportunities and empowers his team to address them,” said Bill Mekrut, vice president and treasurer of FM Global.

The bottom line comes from his boss, Subramaniam. “Unlike many CFOs, Burchill strategically spends almost as much time traveling and meeting with policyholders every year as he does behind his desk,” the CEO wrote in his nomination form.

“This was especially important during the economic meltdown. … His work has helped lead the company to a client retention rate of more than 90 percent year after year,” Subramaniam said •

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